The Review of Economics and Statistics Vol. 104 No. 5 2022
“It's Not You, It's Me”: Prices, Quality, and Switching in U.S.-China Trade Relationships
Abstract
Costs from switching suppliers can affect prices by discouraging buyer movements from high- to low-cost sellers. This paper uses confidential data on U.S. importers and their Chinese exporters to investigate these costs. I find barriers to supplier adjustments: nearly half of importers keep their partner over time. Importers switch less if their supplier offers higher quality or provides lower prices. I propose and structurally estimate a dynamic discrete choice model to compute switching costs. Cost estimates are large, heterogeneous across products, and matter for trade prices: halving switching costs reduces the U.S.-China Import Price Index by 7.6%.
- DOI
- 10.1162/rest_a_01015
- Volume
- 104
- Issue
- 5
- Pages
- 909-928
- Language
- en
- Sources
- openalex crossref